Oh, my! Madoff!

So, WorldCom was a $3.8 billion accounting fraud.  We hooted it up over that one, calling the company’s collapse the largest bankruptcy in the history of the United States.  That stat always bothered the Barometer because we were, after all, relying on the company’s numbers to get the loss figures.  Now comes Bernard Madoff and his securities firm, an operation that managed to lose $50 billion.  Madoff, the former chairman of Nasdaq, was able to run nothing more sophisticated than a Ponzi scheme for four years.  The SEC said, “Now what exactly happened here?”  Mr. Madoff’s lawyer offered, “We will fight to get through this unfortunate series of events.”  “Unfortunate series of events” is the name of a children’s book series, but is hardly descriptive of a gigantic fraud.  The Barometer has but one question.

How many times must we repeat the same scheme and the resulting losses before we learn?  The same scheme is, “I promise you more money and returns than the market has ever seen because, after all, I am smarter than the other guys.”  The Barometer understands that the recent Wall Street performance of a gaggle of the brightest minds coupled with a pack of quantitative dweebs would not take much brain power to top.  However, since the time we have had markets we have fallen for the Ponzi model.  In the Barometer’s career, we have had New Era Philanthropy, the Baptist Foundation of Arizona, Lincoln Savings and Loan, and too many others to name, and the story is the same.  For some reason not at all tied to financial performance, charismatic leaders are able to convince others to invest big-time dollars with the same outcome:  the inevtiable loss of big-time dollars.  If it sounds too good to be true, it is too good to be true.  Business is very basic:  good product, keeping costs low, customer service, and, perhaps above all, forthrightness.  Forthrightness with customers, vendors, suppliers, and investors.  This formula is simple — perhaps too simple to fail.  We have lived through sophistication and the yields have proved non-existent.  Back to basics.  Run to the basics.  Invest in companies that follow the basics.  Restore the economy with the basics.  And start demanding dividends.  Dividends don’t lie.  paper gains do.  See the Barometer’s book, Building a Business Through Good Times and Bad:  The Lessons From 15 Companies, Each with a Century of Dividends. 

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
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One Response to Oh, my! Madoff!

  1. David A Counts says:

    2008 is the year of the Ponzi Scheme. We have Madoff and then Petters in Minnesota (who is still denying guilt) being accused of a $3.5B – $13B Ponzi scheme. I like your comments but good, simple, and basic business principles, or principaled principles, seem to crazy for some people, you have to go the illegal route…unfortunately a lot of greedy people are willing to co-opt sound investment strategies and get taken.

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